Stocks Rally as Chip Makers Rebound

The S&P 500 Index ($SPX) (SPY) on Friday closed up by +0.98%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up by +1.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.77%.  December E-mini S&P futures (ESZ25) rose +1.00%, and December E-mini Nasdaq futures (NQZ25) rose +0.78%.

US stock indexes recovered from early choppy trading on Friday and settled higher.  Semiconductor stocks rallied on Friday, leading the broader market higher, in hopes of a Fed rate cut next month.  Dovish comments from New York Fed President John Williams on Friday knocked T-note yields lower and ignited a rally in stocks when he said he sees room for a Fed rate cut in the “near term."  His remarks knocked the 10-year T-note yield down to a 3-week low of 4.03% and pushed up the chance of a Fed rate cut at next month’s FOMC meeting to 63% from 35% on Thursday.  Stocks also found some support today after the University of Michigan's US Nov consumer sentiment index was revised upward.

Stocks were under early pressure on Friday, with the S&P 500 and Nasdaq 100 falling to 2.25-month lows.  Concerns remain about lofty valuations in tech stocks and doubt over whether artificial intelligence spending will pay off, which led to selling in chip makers and AI-infrastructure stocks over the past three weeks as the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 stock indexes continued their corrections from record highs.

The US Nov S&P manufacturing PMI fell -0.6 to 51.9, close to expectations of 52.0.

The University of Michigan US Nov consumer sentiment index was revised upward by +0.7 to 51.0, stronger than expectations of 50.6.

The University of Michigan US Nov 1-year inflation expectations were unexpectedly revised lower to 4.5% from the previously reported 4.7%. Also, the Nov 5-10 year inflation expectations were unexpectedly revised lower to 3.4% from the previously reported 3.6%.

Stocks and bonds garnered support on Friday from dovish comments from New York Fed President John Williams, who said "he still sees room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral," as downside risks to employment have increased while upside risks to inflation have eased. 

However, other Fed comments on Friday were hawkish.  Boston Fed President Susan Collins said that holding interest rates steady would be "appropriate for now" as inflation is likely to stay elevated for some time.  Also, Dallas Fed President Lorie Logan said, "With two rate cuts now in place, I'd find it difficult to cut rates again in December unless there is clear evidence that inflation will fall faster than expected or that the labor market will cool more rapidly."

The price of Bitcoin (^BTCUSD) fell more than -2% on Friday to a 7.25-month low, as market sentiment toward cryptocurrencies remains poor.  Bitcoin remains in a sharp 6-week-long downtrend, with prices down more than 35% from a record high last month. 

The Bureau of Labor Statistics (BLS) on Friday canceled its October consumer price report and said the November consumer price report will be released on December 18.  On Wednesday, the BLS said it will not publish an October employment report and noted that it will incorporate those payroll figures into the November report, set to be published on December 16.  Other delayed US economic reports are also expected to be released in the coming days, but have not yet been scheduled.

The markets are discounting a 63% chance of another -25 bp rate cut at the next FOMC meeting on December 9-10.

Q3 corporate earnings season is drawing to a close as 466 of the 500 S&P companies have released results.  According to Bloomberg Intelligence, 82% of reporting S&P 500 companies exceeded forecasts, on course for the best quarter since 2021.  Q3 earnings rose +14.6%, more than doubling expectations of +7.2% y/y. 

Overseas stock markets settled lower on Friday.  The Euro Stoxx 50 fell to a 1.75-month low and closed down -0.98%.  China’s Shanghai Composite dropped to a 1.25-month low and closed down -2.45%.  Japan’s Nikkei Stock 225 closed down -2.40%.

Interest Rates

December 10-year T-notes (ZNZ5) on Friday closed up by +12 ticks.  The 10-year T-note yield fell -2.4 bp to 4.061%.  Dec T-notes rallied to a 3-week high on Friday, and the 10-year T-note yield fell to a 3-week low of 4.034%.  T-notes moved higher Friday on dovish comments from New York Fed President John Williams, who said he sees room for another Fed interest rate cut in the “near term.”  Also, easing inflation expectations are supportive of T-notes, as Friday's 10-year breakeven inflation rate fell to a 6.5-month low of 2.239%.  T-notes fell back from their best level after Boston Fed President Susan Collins and Dallas Fed President Lorie Logan said that holding interest rates steady would be "appropriate for now."

European government bond yields moved lower on Friday.  The 10-year German bund yield fell to a 1-week low of 2.671% and finished down -1.3 bp to 2.703%.  The 10-year UK gilt yield fell -4.0 bp to 4.546%.

The Eurozone Nov S&P manufacturing PMI unexpectedly fell -0.3 to 49.7, weaker than expectations of an increase to 50.1 and the steepest pace of contraction in 5 months.  The Nov S&P composite PMI fell -0.1 to 52.4, weaker than expectations of no change at 52.5.

UK Oct retail sales ex-auto fuel fell -1.0% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 5 months.

ECB Vice President Luis de Guindos said, "The Eurozone economy is performing better than we expected just three or four months ago," and the current level of interest rates is "appropriate."

Swaps are discounting a 3% chance for a -25 bp rate cut by the ECB at its next policy meeting on December 18.

US Stock Movers

Home builders and building suppliers are moving higher today after the 10-year T-note yield fell to a 3-week low, which is supportive of housing demand.  Builders FirstSource (BLDR) closed up more than +7%, and DR Horton (DHI) and Mohawk Industries (MHK) closed up more than +6%.  Also, PulteGroup (PHM) and Lennar (LEN) closed up more than +5%, and Toll Brothers (TOL) closed up more than +4%.

Chip makers recovered from early losses on Friday and rallied sharply, lifting the overall market.  GlobalFoundries (GFS) closed up more than +5% and ON Semiconductor (ON) closed up more than +4%.  Also, Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), Analog Devices (ADI), and Texas Instruments (TXN) closed up more than +3%.  In addition, Micron Technology (MU), Intel (INTC), Lam Research (LRCX), and Qualcomm (QCOM) closed up more than +2%. 

Defense stocks retreated on news of a peace plan drafted by the US and Russia to end the war in Ukraine.  L3Harris Technologies (LHX) closed down more than -2%.  Also, RTX Corp (RTX) and Lockheed Martin (LMT) closed down more than -1%.  

Enviri Corp (NVRI) closed up more than +28% after Veolia agreed to buy Enviri’s US hazardous waste firm Clean Earth for $3 billion. 

Azenta Inc (AZTA) closed up more than +16% after reporting Q4 revenue from continuing operations of $159 million, above the consensus of $156.4 million.

Ross Stores (ROST) closed up more than +8% to lead gainers in the S&P 500 and the Nasdaq 100 after reporting Q3 sales of $5.60 billion, stronger than the consensus of $5.41 billion, and forecasting Q4 comparable sales of +3% to +4%, better than the consensus of +2.61%. 

Gap (GAP) closed up more than +8% after reporting Q3 total comparable sales rose +5%, stronger than the consensus of +3.11%. 

Paccar Inc. (PCAR) closed up more than +5% after Hedgeye added the stock to its “Best Ideas Long” list.

Intuit (INTU) closed up more than +3% after reporting Q3 net revenue of $3.89 billion, better than the consensus of $3.76 billion. 

Veeva Systems (VEEV) closed down more than -9% after reporting Q3 adjusted gross margin of 77.6%, below the consensus of 77.8%. 

Bath & Body Works Inc (BBWI) closed down more than -6% after Morgan Stanley downgraded the stock to equal weight from overweight. 

Copart (CPRT) is down more than -3% after reporting Q1 revenue of $1.16 billion, weaker than the consensus of $1.18 billion.

Palo Alto Networks (PANW) closed down more than -1% after HSBC downgraded the stock to reduce from hold with a price target of $157.

Earnings Reports(11/24/2025)

Agilent Technologies Inc (A), Amentum Holdings Inc (AMTM), Keysight Technologies Inc (KEYS), Woodward Inc (WWD), Zoom Communications Inc (ZM).